In sum, to the limited extent that Apple has been able to show that any of its harms were caused by Samsung’s illegal conduct (in this case, only trade dress dilution), Apple has not established that the equities support an injunction. Accordingly, Apple’s motion for a permanent injunction is DENIED.

IT IS SO ORDERED.

Dated: December 17, 2012

And that is how what is possibly the most sensational, and unexpected, twist in the Apple v Samsung smartphone patent dispute came to pass. Judge Lucy Koh presided over the case brought by the former against the latter in the Northern District of California - which ended in August with 26 Samsung products being found to have infringed various Apple design and utility patents, and a jury award to Apple of $1.05 billion. She had delayed a decision on the injunction, clearly the prize that Apple was seeking, in order to hear detailed arguments from both sides. Having listened, Koh has given Samsung, which would happily pay much more than $1.05 billion to keep full and unfettered access to the US market, exactly what it wanted. Her decision is set out in full in a 23 page ruling. But Koh summarises her reasoning in this way:

Weighing all of the factors, the Court concludes that the principles of equity do not support the issuance of an injunction here. First and most importantly, Apple has not been able to link the harms it has suffered to Samsung’s infringement of any of Apple’s six utility and design patents that the jury found infringed by Samsung products in this case. The fact that Apple may have lost customers and downstream sales to Samsung is not enough to justify an injunction. Apple must have lost these sales because Samsung infringed Apple’s patents. Apple has simply not been able to make this showing. Though this is a case where the “plaintiff practices its invention and is a direct market competitor,” Edwards Lifesciences 699 F.3d at 1315, it is not a case where the patented inventions are central to the infringing product. Without the required causal nexus, the parties’ status as direct competitors simply does not justify an injunction.

Further, the Court has found that neither the inadequacy of money damages nor the public interest favors an injunction here, for either patent infringement or trade dress dilution. Regarding trade dress dilution specifically, as explained above, the case for an injunction is especially weak, because there are no diluting products still available, even without an injunction. Finally, this Court has previously noted the relevance to the present situation of Justice Kennedy’s observation in eBay:

“When the patented invention is but a small component of the product thecompanies seek to produce and the threat of an injunction is employed simply forundue leverage in negotiations, legal damages may well be sufficient to compensatefor the infringement and an injunction may not serve the public interest.”

547 U.S. at 396-97. The phones at issue in this case contain a broad range of features, only a small fraction of which are covered by Apple’s patents. Though Apple does have some interest in retaining certain features as exclusive to Apple, it does not follow that entire products must be forever banned from the market because they incorporate, among their myriad features, a few narrow protected functions. Especially given the lack of causal nexus, the fact that none of the patented features is core to the functionality of the accused products makes an injunction particularly inappropriate here.

This case is simply not comparable to i4i or to Edwards, the Federal Circuit’s most recent case discussing permanent injunctions in the patent context. In i4i, the plaintiff was a very small company whose business depended on its patented product, and the defendant was a large company of whose business, the infringing product was but a small part. Thus, the defendant’s infringing product “significantly change[d] the relevant market. . . forcing i4i to change its business strategy.”598 F.3d at 862. Without an injunction, there was simply no way for the plaintiff to continue to compete. Here, Samsung may have cut into Apple’s customer base somewhat, but there is no suggestion that Samsung will wipe out Apple’s customer base, or force Apple out of the business of making smartphones. The present case involves lost sales – not a lost ability to be a viable market participant. Edwards involved a patent that was much more central to the infringing product than the patents at issue here; there was no doubt that the patented technology in that case was a central force driving sales of the infringing product. 699 F.3d at 1308 (describing a prosthetic heart valve implanted by use of a collapsible stent, and a patent for the necessary collapsible stent). If the patents at issue here were similarly essential to the core of Samsung’s products, the Court might see things differently.

Florian Mueller on the FOSS patents blog has already given his initial reactions to the decision and, no doubt, there will be plenty of others weighing in over the coming hours and days. I am not a lawyer, so cannot comment on the specifics, but I do note that it is highly unusual, if not unprecedented, for an operating company that has prevailed as a plaintiff in a US patent case not to be given a permanent injunction if it requests one. The injunction is what Apple wanted and it is what Samsung most feared. For two companies swimming in cash the jury award was neither here nor there.

Apple will surely appeal Koh’s decision and it is quite possible that the CAFC will rule in its favour, but it is not certain. What we can say, though, is that if Apple does not get the ruling overturned, the entire dynamic of the smartphone patent wars will have changed dramatically – with Apple’s position fundamentally weakened and its ability to dictate a winning settlement significantly undermined.

I have been saying for a while now that Apple would be best advised to get out of the courtroom in order to start competing against Android on product offering and price rather than patents. Not too long ago, the company’s management could well have dictated a very powerful and favourable deal with Samsung. Now, as Android is gaining increasing traction among consumers, they find themselves just one decision away from seeing their entire strategy blow up in their faces. It is not going to be a very merry Christmas in Cupertino. Just a few miles away in Mountain View, as well as over the ocean in Seoul, they are going to be stocking up on party hats, streamers, mistletoe and holly. For Google and Samsung it truly is the season to be jolly.